PITTSBURGH — Kennametal Inc. on Monday reported results for its fiscal 2023 third quarter ended March 31.
The company posted earnings per diluted share (EPS) of $0.39, compared with $0.42 in the prior year quarter. EPS was not adjusted in the current quarter, whereas adjusted EPS was $0.47 in the prior year quarter.
"We delivered year-over-year organic sales growth and strong cash flow in the quarter and continued the successful execution of our strategic initiatives, while navigating macroeconomic headwinds, such as a slower recovery in China and high inflation," said Christopher Rossi, president and CEO. "Driven by these results and the continued confidence in our strategic initiatives, we are raising our full year sales and EPS outlook."
Sales of $536 million increased 5% from $512 million in the prior year quarter, reflecting organic growth of 8% and a favorable business days effect of 1%, partially offset by an unfavorable currency exchange effect of 4%.
Operating income was $52 million, or 9.8% of sales, compared to $53 million, or 10.4% of sales, in the prior year quarter. The slight decrease in operating income was primarily due to higher raw material costs of approximately $20 million, under-absorption of approximately $5 million within the Infrastructure segment, higher wages, general inflation and unfavorable foreign currency exchange of approximately $3 million. These factors were offset by higher price realization and, in the Metal Cutting segment, higher sales volumes. Operating income was not adjusted in the current quarter, whereas adjusted operating income was $58 million, or 11.4% margin, in the prior year quarter.
The company's expectations for the full fiscal year 2023 are as follows:
- Adjusted EPS is expected to be $1.50 - $1.70
- Sales expected to be $2.07 - $2.1 billion, including a currency headwind of approximately $100 million
- Pricing actions expected to cover raw material costs, wages and general inflation
- Metal Cutting volume levers at expected rate
- Infrastructure operating margin expected to return in Q4 to approximately Q1 FY23 level
- Free operating cash flow of 100% of adjusted net income
Segment Results
Metal Cutting sales of $334 million increased 6% from $314 million in the prior year quarter, driven by organic growth of 10% and a favorable business days effect of 1%, partially offset by an unfavorable currency exchange effect of %. Operating income was $44 million, or 13.1% of sales, compared to $30 million, or 9.6% of sales, in the prior year quarter. The increase in operating income was primarily due to higher price realization, higher sales volumes and a gain of approximately $1 million on a property sale. These factors were partially offset by higher raw material costs of approximately $7 million, higher wages and unfavorable foreign currency exchange of approximately $2 million. Operating income was not adjusted in the current quarter, whereas adjusted operating income was $35 million, or 11.1% margin, in the prior year quarter.
Infrastructure sales of $203 million increased 2% from $198 million in the prior year quarter, driven by organic growth of 5%, partially offset by an unfavorable currency exchange effect of 3%. Operating income was $10 million, or 4.8% of sales, compared to $24 million, or 11.9% of sales, in the prior year quarter. The decrease in operating income was primarily due to higher raw material costs of approximately $13 million, under-absorption of approximately $5 million, general inflation and lower sales volumes. These factors were partially offset by higher price realization. Operating income was not adjusted in the current quarter, whereas adjusted operating income was $24 million, or 12% margin, in the prior year quarter.
Kennametal announced that its Board of Directors declared a quarterly cash dividend of $0.20 per share. The dividend is payable on May 23, 2023 to shareholders of record as of the close of business on May 9, 2023.
